Chapter 7: Production Costs (Multiple Choice)

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    • author "Patrick Rosenauer"
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    • folders "Microeconomics"
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    • fileName "Chapter 7: Production Costs (Multiple Choice)"

    • Unlike impicit costs, explicit costs:
    • A. Reflect opportunity cost.
    • B. Include the value of the owner's time.
    • C. Are not included in the accounting statement of the firm.
    • D. Are actual cash payments.
    • E. Do not change with the output rate of the firm.
    • D. Are actual cash payments.
  1. Which of the following is not an explicit cost?
    A. Sales taxes.
    B. The firm owner's time.
    C. Salaries.
    D. Insurance.
    E. Utilities, such as gas and electricity.
    B. The firm owner's time.
    (this multiple choice question has been scrambled)
  2. The amount of money that could have been made by renting a piece of land to be uesed for building an office building instead of using the land for employee parking is an:
    A. Explicit cost.
    B. Accounting cost.
    C. Pure economic cost.
    D. Implicit cost.
    D. Implicit cost.
    (this multiple choice question has been scrambled)
  3. Implicit costs are best thought of as:
    A. Variable costs.
    B. Sunk costs.
    C. Accounting costs.
    D. Opportunity costs.
    E. Marginal costs.
    D. Opportunity costs.
    (this multiple choice question has been scrambled)
  4. If a firm has total revenue of $200 million, explicit costs of $190 million, and implicit costs of $30 million, its economic profit is:
    A. $10 million.
    B. $70 million.
    C. $10 million.
    D. $20 million.
    E. $200 million.
    D. $20 million.
    (this multiple choice question has been scrambled)
  5. Economic profit is:
    A. Less than accounting profit if implicit costs are greater than zero.
    B. Never less than accounting profit.
    C. Less than accounting profit if implicit costs are zero.
    D. Always less than zero.
    A. Less than accounting profit if implicit costs are greater than zero.
    (this multiple choice question has been scrambled)
  6. Economists says that a firm has a normal profit when:
    A. Its economic profit is zero.
    B. It can pay all its variable costs.
    C. It earns a return of at least 10 percent.
    D. Its accounting profit is positive.
    A. Its economic profit is zero.
    (this multiple choice question has been scrambled)
  7. Which of the following is an example of a fixed input?
    A. The acreage of a farmer's land.
    B. Machinery.
    C. The size of a firm's plant.
    D. All of the above.
    D. All of the above.
  8. Variable inputs are defined as any resource that:
    A. Varies with the size of the firm's plant.
    B. cannot be changed as output changes.
    C. can be increased or decreased hourly.
    D. can be changed as output changes.
    C. can be increased or decreased hourly.
    (this multiple choice question has been scrambled)
  9. The short run is a period of time:
    A. In which production occurs within one year.
    B. In which a firm uses at least one fixed input.
    C. In which production occurs within six months.
    D. That is long enough to permit changes in the firm's plant size.
    B. In which a firm uses at least one fixed input.
    (this multiple choice question has been scrambled)
  10. During the short run, a firm has enough time to adjust:
    A. Its technology.
    B. Its fixed inputs.
    C. Its variable inputs.
    D. All of its inputs-both fixed and variable.
    C. Its variable inputs.
    (this multiple choice question has been scrambled)
  11. The long run is a period of time:
    A. That is long enough to permit changes in all the firm's, both fixed and variable.
    B. In which procuction occurs beyond five years.
    C. That is too short to change the size of a firm's plant.
    D. In which production occurs beyond one year.
    A. That is long enough to permit changes in all the firm's, both fixed and variable.
    (this multiple choice question has been scrambled)
  12. In the long run, total fixed cost:
    A. Is constant.
    B. Falls.
    C. Rises.
    D. Does not exist.
    D. Does not exist.
    (this multiple choice question has been scrambled)
  13. Which of the following statements is true?
    A. Economic profit equals accounting profit minus implicit costs.
    B. The short run is any period of time in which there is at least one fixed input.
    C. A fixed input is any resource for which the quantity cannot change during the period under consideration.
    D. In the long run there are no fixed costs
    E. All of the above.
    E. All of the above.
  14. A firm can produce 450 gallons of milk per day with 4 worker and 500 gallons per day with 5 workers. The marginal product of the fifth worker expressed in gallons per worker per day, is:
    A. 35.
    B. 50.
    C. 70.
    D. 350.
    B. 50.
    (this multiple choice question has been scrambled)
  15. If the units of variable input in a production process are 1, 2, 3, 4, and 5, and the corresponding total outputs are 30, 34, 37, 39, and 40, repectively. The marginal product of the fourth unit is:
    A. 39.
    B. 1.
    C. 2.
    D. 37.
    C. 2.
    (this multiple choice question has been scrambled)
  16. Marginal product measures the change in:
    A. A firm's revenue brought about by changing production by one unit.
    B. The firm's profit brought about by employing one more input.
    C. Total cost brought about by changing production by one unit.
    D. Product price brought about by changing production by one unit.
    E. The firm's output brought about by emplying one additional unity of input.
    E. The firm's output brought about by emplying one additional unity of input.
    (this multiple choice question has been scrambled)
  17. When a total output curve is falling, its corresponding marginal product curve is:
    A. Falling.
    B. Rising.
    C. Vertical.
    D. Horizontal.
    A. Falling.
    (this multiple choice question has been scrambled)
  18. The law of diminishing marginal returns implies that, in the short run:
    A. Wages of workers must eventually increase.
    B. The marginal product of the variable input must eventually decrease.
    C. Output must fall beyond a certain point.
    D. Price must fall beyond a certain poin.
    E. Total cost must fall beyond a certain point.
    B. The marginal product of the variable input must eventually decrease.
    (this multiple choice question has been scrambled)
  19. In order for the law of dimising returns to be present, we must:
    A. Double the output when labor input is doubled.
    B. Output decreasing as more laborers are hired.
    C. At least one factor of production to be fixed.
    D. Dimultaneous changes in labor and capital.
    E. The price of labor incresing as more workers are hired.
    C. At least one factor of production to be fixed.
    (this multiple choice question has been scrambled)
  20. Marginal cost is defined as the increasing in total cost resulting from an increase in:
    A. A firm's pland size.
    B. Output of 100 units.
    C. One unit of output.
    D. One unit of labor.
    C. One unit of output.
    (this multiple choice question has been scrambled)
  21. Which of the following is true at the point where dimishing returns set in?
    A. Both marginal product and marginal cost are at a minimum.
    B. Marginal product is at a maximum and marginal cost at a minimum.
    C. Marginal product is at a minimum and marginal cost at a maximum.
    D. Both marginal product and marginal cost are at a maximum.
    B. Marginal product is at a maximum and marginal cost at a minimum.
    (this multiple choice question has been scrambled)
  22. The marginal cost is the:
    A. Marginal product is at a minumum and marginal cost at a maximum.
    B. Change in total cost as the quantity changes by one unit.
    C. B and C.
    D. Marginal product is at a maximum and marginal cost at a minimum.
    C. B and C.
    (this multiple choice question has been scrambled)
  23. When the cost curves have U-shapes, at the point where marginal cost equals average total cost:
    A. Marginal cost is rising.
    B. The fixed cost has been fully depreciated.
    C. B and C.
    D. Average variable cost is falling.
    E. Average total cost is at its minimum.
    C. B and C.
    (this multiple choice question has been scrambled)
  24. When marginal cost is below average total cost:
    A. Total costis rising.
    B. Total variable cost is falling.
    C. Average total cost is falling.
    D. Total cost is falling.
    E. Average fixed cost is rising.
    C. Average total cost is falling.
    (this multiple choice question has been scrambled)
  25. Which of the following statements is true?
    A. MC equals the change in ATC divided by the change in Q.
    B. AVC = TC/Q.
    C. TFC = TC - TVC.
    D. TC = TFC - TVC.
    C. TFC = TC - TVC.
    (this multiple choice question has been scrambled)
  26. The total cost curve is the sum of the:
    A. Total fixed and marginal cost curves.
    B. Total fixed and total variable cost curves.
    C. Marginal cost and total variable cost curves.
    D. None of the above.
    B. Total fixed and total variable cost curves.
    (this multiple choice question has been scrambled)
  27. Which of the following statements is true?
    A. The law of diminishing returns states that beyond some point the marginal product of a variable resource continues to rise.
    B. When marginal droductivity of a variable input is falling then marginal costs of production must be rising.
    C. The marginal product is the change in total output by adding one additional unit of a fixed input.
    D. Fixed costs are costs which var with the output level.
    E. When marginal cost is below average cost, average cost rises; when marginal cost is above average cost, average cost falls.
    B. When marginal droductivity of a variable input is falling then marginal costs of production must be rising.
    (this multiple choice question has been scrambled)
  28. Longrun economies of scale exist when the longrun average cost curve:
    A. Rises.
    B. Remains constant.
    C. Falls.
    D. Does not exist.
    C. Falls.
    (this multiple choice question has been scrambled)
  29. Economies of scale are created by greater efficiency of capital and by:
    A. Increased specialization of labor.
    B. Smaller plant sizes.
    C. Longer chains of command in management.
    D. Better wages for labor.
    A. Increased specialization of labor.
    (this multiple choice question has been scrambled)
  30. Diseconomies of scale exist over the range of output for which the long-run average cost curve is:
    A. Constant.
    B. Rising
    C. Falling.
    D. Subject to diminishing returns.
    B. Rising
    (this multiple choice question has been scrambled)
  31. The primary source of scale diseconomies appears to be:
    A. Division of labor.
    B. A firm's inability to acquire quality resources.
    C. The organizational difficulties of managina an ever larger enterprise.
    D. Too little demand for the firm's product.
    E. Consumers who resist dealing with large firms.
    C. The organizational difficulties of managina an ever larger enterprise.
    (this multiple choice question has been scrambled)
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Chapter 7: Production Costs (Multiple Choice)
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Chapter 7: Production Costs (Multiple Choice)
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